Explain how the price of new security issue is determined.

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Question by kelw
Submitted on 7/9/2003
Related FAQ: The Investment FAQ (part 1 of 20)
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Explain how the price of new security issue is determined.

Answer by Isaac Esparza
Submitted on 2/19/2004
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Answer by D. Thomas
Submitted on 9/18/2005
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New securities are priced carefully. Initially, the managing investment banker will do an in-depth analysis of the company to make a determination of the company's worth. A company's industry, anticipated earnings and ability to pay dividends, and financial characteristics are all part of this analysis. Based on this analysis, the price will tentatively be set and a price comparison will be done against other firms in the same industry. Another important factor to take into account when determining the price is the anticipation of public demand. The emphasis of the new security's price determination should be on the company's need to make a profit.

Answer by DougMR
Submitted on 12/3/2005
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What is the answer?

Answer by lyn
Submitted on 1/25/2007
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explain how the price of the new security issued is determined.

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